Socialism's last bastion?

December 13, 1993|By Janerik Larsson

Stockholm -- IN THE mid-1980s, when my conservative friends in the United States would criticize Swedish socialism, I warned that America might someday become the world's last socialist country. The events of the past few years show I was closer to the truth than even I had imagined.

While the Reagan years provided a brief respite from excessive regulation, high tax rates, and massive income redistribution -- common to all socialist countries -- little was done to permanently shrink the bloated federal bureaucracy. After President Reagan left office, the bureaucracy started growing again, and was soon back to its pre-Reagan size.

President Clinton promised change, but despite the Reaganesque rhetoric of his campaign -- promising less regulation and middle-class tax cuts -- his policies appear more in line with Europe's Social Democrats. In short, the United States is catching what the rest of the world knows as the Swedish disease.

In the short run, meaningful curbs on excessive government appear unlikely. First, because the American people do not appear to understand basic economic truths. Second, because the American legal system has created a regulation mania that makes Sweden look like a free-market paradise by comparison.

American lawyers blanket the country like a plague of biblical locusts. As a result, the United States is bogged down in a system of complex legalisms, with an abundance of laws but too little justice.

Small companies without the high-powered legal talent to make their way through the thicket of laws and regulations suffer the most from the current system, especially the politically invisible payroll taxes that continue to be heaped upon them. We witnessed the same thing in Sweden during the 1970s.

President Clinton's proposed health-care tax -- which he euphemistically calls a "premium" -- will make matters even worse.

In Sweden, we learned the hard way that wealth creation -- the engine of any economy -- is virtually impossible under such circumstances. We assumed for too many years that our economy would just keep on growing -- that all our politicians had to worry about was redistributing the wealth. Then, when the growth slowed, and eventually stopped, Sweden was gripped by a severe case of reality.

Health-care reform may provide America with a similar reality check. Nationalization of the U.S. health-care sector would be the world's most extensive socialist "reform" since the 1950s, when the Swedish pension system -- our equivalent of Social Security -- was put into place. As we found out, however, basing policy on the flawed theory that you can spend now and pay later -- a problem already undermining U.S. politics -- will inevitably lead to insolvency.

Regardless of the political labels they wear, America's socialist politicians and bureaucrats are living dangerously. Dissatisfaction with government grows daily -- along with the conflicting demand that government do more.

From the outside looking in, it is clear the United States has grown weak and confused. America's unique heritage of ideas -- the belief that anybody can succeed through hard work and perseverance -- simultaneously is being challenged by two conflicting ideas. One is the uninhibited anti-government populism stirred by Pat Buchanan and H. Ross Perot. The other is the unrestrained promise of socialism -- that happiness can be achieved by income redistribution and federal handouts -- embodied in policies like the Clinton health plan. The result won't be gridlock, but the same kind of paralysis that now grips Europe.

Clearly the United States is headed for a collision with reality. While there's always a possibility U.S. voters will cut the socialist experiment short, the rebellion probably won't take place until after the damage is done.

We learned this the hard way in the socialist paradise of Sweden.

Janerik Larsson is senior vice president of the Swedish Employers Confederation in Stockholm.

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